Sir Richard Branson has hit out at the rail franchising system, criticising the government's focus on cost - but promising to pay "billions of pounds" to the Treasury if Virgin Trains retains its grip on the West Coast main line. Its franchise expires one year from today.

The Virgin Group founder was speaking at Euston station, at an event to mark 30 years of tilting trains in Britain; the Advanced Passenger Train made its first abortive run on 7 December 1981, only to be ignominiously towed back to Glasgow Central by a diesel locomotive. It turned out to be the wrong kind of tilting train: in the past decade Virgin Trains has successfully introduced a fleet of Pendolino rolling stock, cutting journey times and increasing frequencies between London, Birmingham and Manchester.

Yet despite doubling the number of passengers carried over the past seven years, there is no guarantee that Virgin will retain its West Coast franchise. After bringing in the first new trains in decades on the cross-country routes via Birmingham, the company lost out to Arriva. Virgin Trains also failed in its bid for the East Coast franchise, due to what Sir Richard called "underbidding". The winner, GNER, had the franchise withdrawn five years ago when it ran into financial difficulties - largely because of over-optimistic forecasts about passenger numbers and revenue.

Sir Richard called for "a beauty parade of innovation and quality", looking beyond the financial benefits to the government: "If you just go for the bottom line, you get the cheapest everything. That's not what people want." He declined to say how much Virgin would bid for the franchise renewal, but said it would run into billions.

The Virgin founder also claimed that "We've got the best rail network in Europe". With France about to open yet another stretch of high-speed track (a new line between Mulhouse and Dijon that is, on its own, longer than Britain's entire high-speed network), this surprised rail experts. But Sir Richard explained that his assertion was based on customer satisfaction, safety and growth in passenger numbers.